Over the weekend, the US Congress passed the Unlawful Internet Gambling Enforcement Act. Under the terms of the act, US credit card companies and banks are now prohibited from processing transactions for online gambling sites.
In one swoop, the lawmakers effectively killed the burgeoning online poker, casino, and betting industry in the United States. Unsurprisingly, shares of these companies (which over the last couple of years have risen dramatically) took a major bath. Companies such as PartyGaming saw their share prices drop by something like 60 percent.
The Congress has been talking about these measures for several months, so the bill itself did not come as a surprise. The timing, however, did. Analysts had not expected the US to move on this measure for several months. As it was, the gambling enforcement act was tacked onto a larger unrelated bill dealing with US ports.
Despite what feelings you may have about online gambling , it's hard not to feel frustrated at this particular development. (Full disclosure: one of our portfolio companies provides enabling technology for mobile betting)
The move has a whiff of all the worst aspects of the American character: heavy-handed religious moralizing which masks a degree of anti-competitive protectionism. After all, the new law will have no effect whatsoever on the billions of dollars that are spent each year in Las Vegas and Atlantic City.
The new law won't kill online gambling. There is a large (and still emerging) market for it in Asia and Europe. At best it will only retard Internet gambling in the States. We live in a globalized world; I'm waiting for the first wave of startups to come up with a slick solutions that will allow Americans to use these sites while bypassing the financial regulations.
Comments